Preit Chapter 11 Bankruptcy Plan Aims to Reorganize

Preit's Chapter 11 bankruptcy plan is a complex process that involves reorganizing the company's debts and assets to emerge from bankruptcy as a stronger entity.

The plan aims to reduce Preit's debt by approximately $2.3 billion, which is a significant portion of its total debt burden.

Preit has over 50 shopping centers across the US, and the bankruptcy plan will likely impact these properties in some way.

The company is working with its creditors and stakeholders to create a plan that benefits everyone involved.

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PREIT filed for Chapter 11 bankruptcy protection for the second time in three years.

The company lists $2 billion in total debts and $1.7 billion in assets, with a $880 million debt that will be shed as part of the bankruptcy plan.

PREIT will pay all vendors, suppliers, and employees during the Chapter 11 proceedings.

The company has a prepackaged plan that includes debtor-in-possession and exit revolver financing amounting to about $135 million from investors led by Redwood Capital Management and Nut Tree Capital Management.

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Shareholders will receive $10 million and the company will no longer be publicly traded.

About $1.1 billion in PREIT-held debt matured, and all of the company's lenders approved the restructuring.

Existing preferred and common shares of PREIT will be canceled, and the company will no longer be publicly traded after it emerges from bankruptcy.

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PREIT has filed for Chapter 11 bankruptcy for the second time in three years.

The company is hoping to shed around $880M in debt by restructuring its finances through the bankruptcy process.

As part of the filing, PREIT will no longer be publicly traded after it emerges from bankruptcy.

The company will cancel its existing preferred and common shares, and a total payment of $10M will be made to existing shareholders.

PREIT's new board is authorized to issue options or other equity stakes to the management and directors of the reorganized company.

A group of investors led by Redwood Capital Management and Nut Tree Capital Management are providing $135M of debtor-in-possession and exit financing for PREIT.

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The bankruptcy filing will allow PREIT to continue its business operations without interruption while it obtains necessary approvals of its financial restructuring.

First-lien lenders have the option to receive either a cash payment equal to 100% of their claims or convert them into loans equal to 101% of their claims.

Second-lien lenders will get their pro rata share of 65% of the new equity interests in the reorganized PREIT.

Those who backstop the exit facility will receive 35% of the new equity interests in the reorganized PREIT.

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Pennsylvania Real Estate Investment Trust (PREIT) has filed for bankruptcy twice in the span of three years. This is a stark testament to the challenges faced by the retail industry in the post-pandemic landscape.

The company's first bankruptcy filing was in late 2020, and it emerged with renewed access to financing. However, it seems that the financial struggles persisted, leading to a second bankruptcy filing.

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PREIT's second bankruptcy filing was prompted by the maturity of $1.1 billion in debt, which all of its lenders approved. This move will allow the company to shed $880 million in debt and extend the maturity date for its remaining obligations.

The company's plan to restructure its debt involves a prepackaged plan, which includes debtor-in-possession and exit revolver financing amounting to about $135 million. This financing is being provided by investors led by Redwood Capital Management and Nut Tree Capital Management.

As part of the reorganization, existing preferred and common shares of PREIT will be canceled, and the company will no longer be publicly traded after it emerges from bankruptcy. A total payment of $10 million will be made to existing shareholders.

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The financial instability of PREIT was a result of several significant challenges, including a decline in stock value from over $700 per share in the mid-2000s to $42.75 per share in early 2009.

The Great Recession led to this decline, and the COVID-19 pandemic further reduced the company's stock value and affected foot traffic and sales at PREIT's properties.

PREIT struggled to repay its substantial debt burden, which was a major contributor to its financial instability.

The company managed to reduce its debt by $880 million and secured an additional five years for loan repayment as part of its financial restructuring.

PREIT provided $10 million to its stockholders as part of becoming a private organization, and Joseph F. Coradino, the former CEO, stayed on as a consultant to facilitate the leadership transition.

The new CEO, Jared Chupaila, previously CEO at Brookfield Properties' retail real estate vertical, took over the leadership role.

The pandemic disrupted consumer behaviors, leading to decreased demand for formal wear and increased popularity of more casual clothes and athleisure wear.

Retailers had to deal with the increased burden of debt due to these disruptions and had to adapt by adding dining and entertainment options to attract foot traffic.

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PREIT's reorganization plan offers a cash payment or conversion option to first lien lenders, with the option to receive 100% of their claims in cash or 101% of their claims in term loans.

First lien lenders have a clear choice in how they want to be paid, which is a significant aspect of the reorganization plan.

Second lien lenders, on the other hand, will receive their pro rata share of 65% of new equity interests in the reorganized PREIT.

This means they'll have a stake in the company's future, but it's a smaller share compared to first lien lenders.

Second lien lenders who commit to backstop the exit facility will receive an additional 35% of the new equity interests in the reorganized PREIT.

PREIT's stock has taken a hit, dropping 41% in the past month and a whopping 80% year-to-date.

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